When rising bills exceed the money you bring in each month, hardworking Virginians may face the prospect of losing their home. This scenario is all too common when illness, loss of work or other forms of adversity upend your financial well-being. When it becomes necessary to file Chapter 7 or Chapter 13 bankruptcy, you don’t necessarily have to lose your family home. At the Agarwal Law Firm, our bankruptcy lawyers negotiate loan modifications for everyday people.
Benefits of Working with a Bankruptcy Attorney
Although Chapter 7 filings do not have a specific mechanism that allows you to keep your home, negotiating with the lender can prove fruitful. It’s important to keep in mind that banks do not want to lose money. When someone files for Chapter 7, the bank may be tasked with an expensive foreclosure, short selling the property and taking a financial loss. An experienced bankruptcy attorney can open negotiations and craft an agreement to modify the mortgage. However, two crucial technical things will need to occur if the lender agrees.
- The court must approve the loan modification.
- The estate trustee must file a notice agreeing to abandon the property.
Although this may extend the life of your loan, it’s entirely possible to save your home by reducing monthly payments and catching up on outstanding debt.
A Chapter 13 bankruptcy filing has a built-in pathway to protecting vital assets such as the family home. The process generally allows homeowners to halt any foreclosure actions and craft a viable repayment plan.
Part of the negotiation will be coming to new terms with the lender about outstanding payments, reduced monthly premiums and extending the life of the loan in some cases. It’s also not uncommon to persuade a lender to tack on the missed payments on to the end of the loan.
Naturally, the court must approve the loan modification in the context of the overall Chapter 13 plan. However, in many cases, the loan modification and missed payment relief may be enough to allow you to withdraw the Chapter 13 filing.
Consult with an experienced bankruptcy attorney to learn which debt relief option is right for you.
Chapter 7 and 13 Bankruptcy in Richmond, VA
Bankruptcy proceedings are designed to give people who suffered hardships a fresh financial start. After more than 15 years of working closely with our greater Richmond community members, our team of professionals knows how to navigate the Virginia bankruptcy system. We can negotiate a loan modification with your lender from a position of strength and help you keep your home. If you are struggling with debt and mortgage payments, contact the Agarwal Law Firm and schedule a consultation at our Richmond office.
Frequently Asked Questions
How long do loan modifications take?
A loan modification typically takes 30 to 90 days. That timeline is a general average with some happening quickly and others being more drawn out. The efficiency of the process is often determined by the lender’s willingness to modify the loan or come to reasonable terms the court would approve. Working with a Chapter 7 and 13 bankruptcy lawyer with experience in this niche can help expedite the process.
Who qualifies for a loan modification?
To gain approval for a loan modification, you may need to demonstrate that you are unable to make the current payments due to hardship. It will also be essential to persuade the court that you have the means to make steady payments at a reduced rate. This may even involve a trial repayment period. You will need to provide documentation such as tax returns, proof of income, bank account info and a hardship statement for the lender and court to consider. Basically, a qualified person must fall between not being able to pay the current mortgage but able to pay reduced monthly installments.
Do loan modifications affect your credit?
Just about every bit of your financial history impacts your credit score one way or another. Loan modifications are no different in that regard. Some lenders may report the renegotiated terms as not fulfilling the original loan. That may negatively impact your credit. Others may not cite the loan modification at all. In such cases, you can anticipate no repercussions. However, the alternative —foreclosure — will likely have a far worse impact on your credit than a modification.